gold plunges as dollar rises equities reverse gains 1253582015
<p>Gold plunged almost 2% to a four-week low by Wednesday afternoon as the US dollar gained traction, especially against the Japanese yen, and equities markets […]</p>
Share this:
Gold plunged almost 2% to a four-week low by Wednesday afternoon as the US dollar gained traction, especially against the Japanese yen, and equities markets reversed the substantial gains made earlier in the day.
The sharp decline on Wednesday pressured the precious metal below key support around the 1110 level to hit a low just slightly above 1101. In the process, the price of gold dropped sharply below its key 50-day moving average, above which it had been in a tight trading range since the beginning of the week.
Wednesday’s plummet constitutes the largest daily drop in two weeks, and shows the demand for gold in a weak state, especially in light of a strong dollar and ahead of next week’s pivotal Fed statement and decision with regard to a potential rate hike.
As the price of dollar-denominated gold is highly correlated with the US dollar, expectations of a rate hike either in September or December of this year have recently propelled the dollar while placing tremendous pressure on the price of gold.
The past two weeks of losses for gold constitute a retreat from a rebound high around the 1170 resistance level starting in late August. That high was the culmination of a two-week surge in mid-August that lifted the precious metal far above its July five-year low of 1077. The sharp surge was due to a combination of equity market volatility, a pullback in the dollar, and short-covering after the price of gold stagnated in a prolonged consolidation near its lows from late July to early August.
With market expectations of a Fed rate hike occurring either by the end of this year or at least shortly thereafter, the price of gold could very well have significantly further to fall as the dollar continues to be supported.
Further near-term losses could push the precious metal down towards major support around the 1080 level, where price found strong support and a tentative bottom in late July and early August. On a longer-term basis, the primary downside objective is at the 1000 psychological level. Upside resistance currently continues to reside around the key 1142 support/resistance level.
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.